1. February 15, 2011ToMr. Stanford K. McCoyAssistant U.S. Trade Representative for Intellectual Property and InnovationOffice of the United States Trade Representative (USTR)Re: 2011 Special 301 ReviewDear Mr. McCoy,The Brazil Industries Coalition (BIC), the Federation of Industries of the State of SoPaulo (FIESP), the Brazilian Section of the Brazil-U.S. Business Council (CEBEU), andthe National Confederation of Industry (CNI) are making this submission in response tothe request by the United States Trade Representative (USTR) for written commentsfrom the public concerning foreign countries acts, policies, or practices that arerelevant to the decision on whether a particular trading partner of the United Statesshould be identified as a priority foreign country under Section 182 of the Trade Act of1974 (Special 301) or placed on the Priority Watch List or Watch List. The USTRsrequest was published in the Federal Register on December 30, 2010.UNDERSIGNED BUSINESS ASSOCIATIONSThe BIC is a Washington-based trade association that represents Brazilian companiesand other Brazilian trade organizations in the U.S. Its membership is comprised of tradeassociations from the agribusiness and manufacturing sectors, as well as leadingBrazilian companies, most of which are invested in the United States. The BICs missionis to work towards a stronger partnership between Brazil and the U.S. through widerand deeper economic relations and political ties. 1

2. FIESP is the leading regional manufacturing sector organization in Brazil. It is comprisedof 132 sectoral trade associations, representing over 67% of the countrys industrialGDP and approximately 150,000 companies.CEBEU is a bilateral organization that provides a high-level private sector forum for thebusiness communities of both Brazil and the U.S. The Councils members engage insubstantive dialogue on trade and investment issues and communicate those privatesector priorities to the U.S. and Brazilian governments. The Brazilian Section of CEBEUis sponsored by CNI and represents a wide range of Brazilian corporations.CNI is the umbrella manufacturing sector organization in Brazil. Created in 1938, theConfederation is comprised of 27 Federations of Industries in all Brazilian states and theFederal District, and over 1,000 sectoral trade associations representing more than196,000 companies.REQUESTBrazils historical record, as well as recent action taken by the Brazilian government(federal, state, and local) and its private sector, demonstrate that the country,according to the U.S. federal statutes, adequately and effectively protects intellectualproperty rights (IPR), and grants fair and equitable market access to United Statespersons that rely upon intellectual property protection. Evidence for that is provided inthe Annex to this letter.Brazils commitment to the protection and promotion of IPR is unequivocal. It is nolonger perceived by its government and private sector as a self-imposed and unfairburden to its right to development, but both as an intrinsic value of the Brazilian societyand an opportunity.Therefore, the undersigned business associations respectfully request for thethird consecutive year that the USTR removes Brazil from the Special 301Watch List.We look forward to working with the USTR and we are available at any time forclarification of any issue raised in this submission.Respectfully,The Brazil Industries Coalition (BIC)The Federation of Industries of the State of So Paulo (FIESP)The Brazilian Section of the Brazil-U.S. Business Council (CEBEU)The National Confederation of Industry (CNI) 2 3. ANNEX1. ADEQUATE AND EFFECTIVE PROTECTION OF INTELLECTUAL PROPERTY RIGHTSSection 182 of the Trade Act of 1974 determines that the USTR identifies, on an annualbasis, foreign countries that deny adequate and effective protection of intellectualproperty rights (19 USC 2242(a) (1) (A)).According to this Sections special rules for identifications, the USTR must identify suchsituation only if it finds that the particular country: has the most onerous or egregiousacts, policies, or practices (19 USC 2242(b)(1)(A)); that these acts, policies, or practiceshave the greatest adverse impact, actual or potential, on the relevant United Statesproducts (19 USC 2242(b)(1)(B)); and that it is not entering into good faithnegotiations, or making significant progress in bilateral or multilateral negotiations toprovide adequate and effective protection of intellectual property rights (19 USC2242(b)(1)(C)). These rules comprise thus a three-pronged cumulative test.Finally, Section 182 requires that the USTR takes into account the history of intellectualproperty laws and practices in the foreign country (19 USC 2242(b) (4) (A)), as well asefforts of the United States, and the response of the foreign country, to achieveadequate and effective protection and enforcement of intellectual property rights (19USC 2242(b)(4)(B)).Brazil does not incur in any of the abovementioned situations. On the contrary: on onehand, there is a growing consensus within the Brazilian society regarding theimportance of the protection and promotion of IPR and the role of innovation ineconomic and social development. On the other, the Brazilian government has beenresponding to this demand by making significant progress in its legal framework andregulatory structure, law enforcement efforts, and international cooperation initiatives,as described below.Brazilian Society ConsensusThere is a growing consensus within the Brazilian society regarding the importance ofthe protection and promotion of IPR. Accordingly, acts, policies, or practices thatinfringe these rights are perceived and treated as unfair and illegal. They are furtherperceived as practices that threaten consumers life, neglect health and safetystandards, harm manufacturers and IPR owners, and negatively affect the Brazilianeconomy.The recognized negative consequences of IPR violations are also true to the Brazilianexperience: they disrupt legitimate markets, contributing to unemployment andunderemployment; feed the informal economy; reduce government tax revenues;finance organized crime activities; and undermine the development of a strongknowledge-intensive creative economy. Therefore, actions to fight counterfeiting, 3 4. piracy, and other violations are being intensified all across the country at the federal,state, and local levels, with increasingly better results each year.It is worth noting that IPR protection is no longer pursued as a standaloneAdministration effort, but rather as a long-term far-reaching governmental policysupported by Brazilian service businesses, manufacturers, farmers, workers, andconsumers. In addition, there is a strong and increasing political will to strengthen theinstruments that adequately and effectively protect IPR by improving the Brazilian legalframework and regulatory structure, law enforcement efforts, international cooperationinitiatives, and activities supported by the private sector.There is also a general sense that permanent improvements are necessary in order tokeep up with the ever-changing pattern of IPR infringement. Concrete results from theefforts and resources that have been applied so far to fight those illegal activities clearlyindicate that Brazil is on the right track.IPR Protection and Promotion, and Innovation PolicyThe era during which the lack of adequate and effective IPR protection and promotionwas used as an industrial policy tool is long gone in Brazil. Investments in research anddevelopment (R&D) and innovation are now identified as driving elements to increasecompetitiveness and to pave the way to a 21st century knowledge-intensive creativeeconomy. As a corollary, Brazil has been putting great emphasis in strengthening its IPRsystem so as to create a friendly environment that stimulates innovation.In this sense, the Brazilian Innovation Act, inspired by the U.S. Bayh-Dole Act, setsforth measures to promote R&D and innovation aiming at enhancing capacity building,sustaining technological auto-sufficiency, and fostering industrial development in Brazil.So far, results have proved extremely positive with the gradual increase in the numberof Brazilian requests for patents to the United States Patent and Trademark Office(USPTO).In addition to that, innovation policy is now a fundamental pillar of the BrazilianProduction Development Policy (PDP), which aims at increasing private investment inR&D and, therefore, improving innovative action in Brazilian companies through variousfinancial mechanisms.Innovation is also a key element of the 13-item guideline outlining the basis ofPresident Dilma Rousseffs priorities. Guideline #8 sets a goal to transform Brazil into ascientific and technological powerhouse in the next few years. In order to achieve suchan ambitious outcome, the Brazilian Federal Government intends to expand resourcesdevoted to R&D and innovation in areas as different as biotechnology, robotics,information technology, health and pharmaceuticals, biofuels, and renewable energy. 4 5. Brazil is strategically committed to promoting innovation as a means to increase itsprivate sector competitiveness as well as to achieve its social and economicdevelopment goals. Brazilian policymakers widely recognize that IPR protection andpromotion are essential components of any modern innovation policy.Legal Framework Established by the Brazilian Federal GovernmentThe Brazilian current legal framework on IPR protection and promotion results from aconsistent 16-year legislative effort, as seen on the table below: YEARLAW NUMBERLANDMARK LEGISLATION 1995 8974 (January 5, 1995)Biosafety Act 1996 9279 (March 14, 1996) Industrial Property Act 19979456 (April 25, 1997)Plant Varieties Act 19989609 (February 19, 1998) Software Act 19989610 (February 19, 1998) Copyrights Act 1998 9695 (August 20, 1998)Counterfeit Pharmaceuticals Crimes Act 200210603 (December 17, 2002)Trade Secrets Act 200310695 (July 1, 2003) Anti-Piracy Act 2004 10973 (December 2, 2004)Innovation Act 2005 11105 (March 24, 2005)New Biosafety Act 200711404 (May 31, 2007) Integrated Circuits Act 200911903 (January 14, 2009)Pharmaceuticals Traceability ActThe framework fully complies with all international rules and commitments undertakenby Brazil, in particular within the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In fact, in several aspects itadds to the minimum standards agreed to internationally.It is also worth noting that Brazil has forgone its TRIPS-related special and differentialtreatment (SDT) rights embodied in Article 65 of the Agreement and implemented italong with the developed countries in 1996 long before the January 1st, 2000 deadlinefor developing countries and the 2005 deadline exception for specific technology areas.In addition to its successful past achievements, Brazil has been putting great effort inimproving its own domestic laws. Among the proposals currently under consideration bythe Brazilian Congress to amend IPR statutes and increase IPR protection are: i. House Bill 333/99: amends the Industrial Property Act to increase penalties forcrimes against trademarks, patents, and geographical indications, as well asunfair competition. It is currently being discussed under urgency status rules;5 6. ii. House Bill 2729/03: increases the penalty for crimes against software copyrights, trademarks and patents. It is currently being discussed under priority status rules; iii. House Bill 3378/04: amends the Industrial Property Act to allow private criminalaction on IPR violation to be filed on the grounds of new evidence provided byinterested parties. iv. House Bill 4961/05: establishes the patentability of materials and substances extracted from natural living beings and biological materials by granting them the status of inventions or utility models. v. House Bill 5057/09: authorizes expert examination by sampling obtained bystatistical methods in the context of investigations of IPR criminal violations. TheBill is currently being discussed in conjunction with Bill 2729/03; and vi. House Bill 8052/11: amends the criminal procedure rules in order to expedite the pursuit and trial of crimes against copyrights. It is currently being discussed under priority status rules in conjunction with Bill 2729/03.It must be said that IPR-related congressional action in democratic societies takes timedue to the complexity of issues being considered, as well as the vast number ofstakeholders involved. However, a small procedural difference between the rules of theHouse and the Senate in Brazil when compared to their equivalent in the UnitedStates is sometimes used as evidence to undervalue Brazilian efforts. Differentlyfrom the U.S. legislative system, once a bill is introduced in the Brazilian Congress itdoes not need to be re-introduced in succeeding Congresses if it was not enacted intolaw. Therefore, a number of bills date from the end of the 1990s to the mid-2000s. Inthe United States, legislation that sometimes takes decades to be completed does nothave to face the same situation as each Congress lasts for only two years, and billsneed to be re-introduced.Besides the legislative efforts to amend IPR statutes, the Brazilian Federal Government,led by the Ministry of Culture (MinC), is strongly engaged in reviewing the CopyrightsAct of 1998. In this context, public consultations were held during 2010 and publicdiscussions are currently underway so as to analyze proposals for the modernization ofthe federal copyrights legislation. Initiation of legislative procedures to amend the Act isexpected to take place within the next months. Among other provisions aimed atupdating the Brazilian copyrights legislation, the bill includes a notice and take downclause to help curb Internet piracy.On top of the abovementioned solid legal framework, Brazilian judicial courts have beenconsolidating the adequate and effective protection of IPR by interpreting the domesticlegislation in a broad manner. As a clarifying example, the State of So Paulo Court of 6 7. Justice (TJSP) has recently awarded a decision finding that commercial establishments,such as shopping malls, are responsible for monitoring and supervising the activitiesconducted by their associates, and therefore should be liable for damages whenproducts infringing IPR are sold in their stores (TJSP, 5th Chamber, Appeal N. 622.881,May 2009).Regulatory Structure Established by the Brazilian Federal GovernmentNational Institute of Industrial Property (INPI)The National Institute of Industrial Property (INPI) is the Executive Branch agencyresponsible for granting patents and registering trademarks, computer programs,industrial designs, geographical indications, transfer of technology, and commercialfranchising contracts.Bearing in mind the relevance of innovation in Brazils development strategy and theworldwide increase in the number of requests for patents, INPI has been making greatprogress in reducing its backlog when it comes to the process of examining andgranting trademarks and patents.Among other reasons, INPIs success is due to (i) the hiring of several new patents andtrademarks examiners; (ii) an extensive administrative and information technologyrestructuring (e-trademarks system); (iii) the adoption of an automated registry modelfor trademarks based on the Industrial Property Automation System (IPAS) from theWorld Intellectual Property Organization (WIPO); and (iv) the signing of technicalcooperation agreements with major patent offices, such as those in the United Statesand Europe. In addition to such developments, in 2010 INPI has also (v) receivedfurther resources in order to provide more efficient services through the enactment ofLaw 12274, the so-called INPI Staffing Act of 2010; and (vi) published guidelines and apractical handbook for the analysis of trademarks aiming at enhancing transparency,predictability, and uniformity in decision making.As a result, INPI has been successful in reducing the backlog for trademarks andpatents. Although requests for trademarks have risen about 16% in 2010, the backlogin this area was of approximately 2 years. Moreover, irrespective of the increase ofnearly 15% in the number of requests for patents, INPI has managed to reduce thepatent backlog in 12 months in 2010 when compared to 2009. It has also recentlyannounced its intention to grant patents within approximately 4 years by 2015 as partof the Institutes newly published priority action plan for 2011-2015. INPI also intendsto conclude a Memorandum of Understanding (MOU) with USPTO in 2011 in the contextof the Patent Prosecution Highway (PPH) with a view to further reducing the backlog forpatents.It should be noted that since 2009 INPI acts as an International Searching Authority(ISA) and as an International Preliminary Examination Authority (IPEA), which 7 8. contributes to simpler and cheaper requests for patents worldwide. A similar status isonly held by fourteen intellectual property offices around the world.Finally, it should be noted the remarkable work INPI develops in conjunction with theJudiciary in the fields of capacity building, provision of IPR information, andparticipation in judicial proceedings conducted by IPR specialized district courts.National Health Surveillance Agency (ANVISA)The National Health Surveillance Agency (ANVISA) is involved in the public effort tofight counterfeit drugs. In April 2010, ANVISA launched a national public campaignunder the motto True Medication (Medicamento Verdadeiro) in order to raiseawareness about the risks connected to the consumption of counterfeit drugs and tohelp consumers identify fake products. As part of the campaign, numerous seminarsand workshops have been organized in cities all over Brazil, and educational materialhas been provided to public officials at different levels of government.ANVISA has also been implementing the National Drug Control System (SNCM)according to the Pharmaceuticals Traceability Act of 2009, which allows the electronictraceability of all pharmaceutical products manufactured and consumed in Brazil.According to the Agency, 53,575 units of counterfeit and smuggled drugs, and 62.9tons of drugs without registration were seized between January and August 2010.The Roles of INPI and ANVISA in the Brazilian IPR SystemIt should be restated that INPI is the only agency responsible for examining theconditions for granting patents, even in situations involving public health issues, such asthose related to pharmaceutical products and processes. In these cases, while INPI is incharge of analyzing the patentability criteria (novelty, inventive activity, and industrialapplicability), ANVISA limits itself to conduct a public health risk assessment.INPI and ANVISA are two different agencies with distinct and non-overlappinginstitutional missions. Although both intervene during the pharmaceutical patentapplication process, their roles differ. INPI analyzes the patentability requisites andANVISA seeks to protect public health by exercising sanitary control in accordance withTRIPS Article 27.2. Therefore, there is clearly no dual examination on the granting ofa patent, as alleged by some interested parties in the context of the Special 301process. Indeed, such conclusion was confirmed by the Federal Attorney General in agroundbreaking legal opinion issued in October 2009 (N 20/PGF/AE/2009), andreaffirmed by a recent legal opinion issued in January 2011 (N 337/PGF/EA/2010).National Council Against Piracy and Intellectual Property Crimes (CNCP)The Brazilian regulatory structure also comprises the National Council Against Piracyand Intellectual Property Crimes (CNCP), a consultative body within the Ministry of8 9. Justice (MJ). The Council, consisting of members from both public and private sectors,issues guidelines to the formulation of a national plan against piracy and other IPRviolations.According to CNCPs National Plan to Combat Counterfeiting (2009-2012), its strategicprojects and actions include: i. City Free of Piracy: a pilot project to encourage local governments to createmechanisms to reduce piracy; ii. "Trade Against Piracy": an initiative aimed at engaging local stores and shopping malls in the fight against piracy; iii. Partnerships with internet providers: to prevent works protected by copyrights tobe distributed without proper legal authorization. Such proposal has already beenapproved by the Brazilian Attorney Generals Office; iv. Training and capacity building seminars: for federal, state, and local government officials as well as for university students. In 2010, the program reached 1,009 officials and 218 students; v. National Trademarks Database: to be made available to government officialsengaged in monitoring IPR violations and tax evasion. The initiative wasapproved by the Council and is currently under development; and vi. Technical cooperation agreement with ANVISA: to exchange information and fight pirated and counterfeit goods subject to sanitary surveillance. Signed in 2009, the agreement resulted in joint actions involving CNCP, ANVISA, the Brazilian Federal Police (DFP), and the Brazilian Federal Highway Police (DPRF), thus significantly contributing to the increase of drug seizure in Brazil.Inter-Ministerial Group on Intellectual Property (GIPI)Another key organization which is part of the Brazilian regulatory structure is the Inter-Ministerial Group on Intellectual Property (GIPI), an interagency body responsible forexamining issues connected to the Brazilian adherence to international conventions andagreements related to IPR, as well as to the harmonization of Brazils domestic IPRlegislation.Regulation of Compulsory LicensesFinally, a word must be said about the regulation of compulsory licenses, an issue thathas been raised by interested parties in the context of the Special 301 process. Thisparticular provision of the Brazilian law is both legal and legitimate. Furthermore, Brazilhas demonstrated its good faith and non-abusive practice in handling situations related9 10. to its use in order to improve public access to medication. To date only one compulsorylicense has been issued.The potential use of compulsory licenses by the Brazilian government is directlyconnected to public health crisis, in particular the HIV/AIDS epidemic. Article 7 of theTRIPS affirms that the protection and enforcement of IPR should take place in amanner conducive to social and economic welfare. Article 8 further asserts that informulating and amending their laws and regulations, countries may adopt measuresnecessary to protect public health and nutrition.TRIPS Article 31 regulates the use of compulsory licensing, although the legal textincludes the phrase other use [of a patent] without authorization of the rights holderas a means to refer to this policy tool. It establishes the requirements for the use ofsuch mechanism and states that the right can be invoked in cases of nationalemergency or in circumstances of extreme urgency, among other situations. Article 5 ofthe Doha Declaration on TRIPS and Public Health of 2001 further clarified these cases.In addition to the legal basis of Brazilian government actions when taken in accordancewith international agreements, it is also important to stress that Brazil has discussed thecompulsory licensing mechanism use in good faith and in a non-abusive way. TheHIV/AIDS public health crisis is real. It is not a deceiving justification to try to avoidinternational commitments on IPR. And Brazil has now clearly established a tradition ofsocial policies to fight the countrys malaises as reflected in its commitment to find theright balance between social and economic welfare goals.The Brazilian HIV/AIDS program is worldly renowned for its effectiveness in combatingthis public health crisis. It is part of a mosaic of other renowned social policies such asthe conditional credit transfer program to poor families (Bolsa Famlia); the worldslargest youth nutrition program (Merenda Escolar), recognized as a model by the UnitedNations Food and Agriculture Organization (FAO); and the multi-faced approach to theelimination of child and forced labor, recognized by the U.S. Department of Labor (DOL)in 2009 for its notable success.Notwithstanding, the Brazilian private sector has also been ready to act as a facilitatorwhenever its engagement may help the Brazilian government and other interestedparties in finding creative solutions to issues related to compulsory licensing. In 2006,for instance, FIESP actively worked to craft a mutually advantageous arrangementbetween the Brazilian Ministry of Health and a U.S. pharmaceutical company regardingthe production and commercialization of a HIV/AIDS antiretroviral drug. In 2007 and2008, FIESP was involved in another similar effort.Finally, it is important to note that even members of the U.S. Congress consider USTRstraditional approach to the issue inconsistent with health policy priorities and thecountrys international commitments. In that sense, two resolutions were introduced inthe 110th Congress expressly requiring the federal government to honor the10 11. commitments the United States made in the 2001 World Trade Organization DohaDeclaration on the TRIPS Agreement and Public Health, which allows member states ofthe World Trade Organization to use to the full the flexibilities in the Agreement onTrade-Related Aspect of Intellectual Property Rights (in this resolution referred to asthe TRIPS Agreement) to protect public health and, in particular, to promote access tomedicines for all, including the issuance of compulsory licenses on grounds determinedby member states. Resolution S. RES. 241 was introduced in the Senate on June 20,2007 by Senator Sherrod Brown (Democrat Ohio) and co-sponsored by another 5members. Resolution H. RES. 525 was introduced in the House on June 28, 2007 bythen Representative Thomas Allen (Democrat Maine, 1st District) and co-sponsored byanother 11 members.Law Enforcement by the Brazilian Federal GovernmentSignificant law enforcement efforts by the Brazilian Federal Government are yieldingincreasing concrete results over the years.Brazilian Federal Revenue (RFB)Official data indicates that since 2004 the total value of goods seized by the BrazilianFederal Revenue (RFB) has been growing steadily. In 2010, the value was ofapproximately R$ 1.3 billion as a result of 2,223 surveillance and repression operations. PRODUCTGOODS SEIZED (R$) Weapons and Ammunition 190,453.85 Cigarettes93,906,589.29 Electronics115,468,626.49 Toys17,562,018.91 Sunglasses68,937,030.66 Clothing68,441,229.22 SEIZED VEHICLES106,120,019.68 11 12. Brazilian Federal Highway Police (DPRF)In 2010, the Brazilian Federal Highway Police (DPRF) seized more than 28 million unitsof counterfeit goods, a record almost 73% higher than registered in the whole year of2009:As for the list of goods, it should be noted the striking amount of pharmaceuticalproducts seized by DPRF, which jumped from 3.2 million units in 2009 to 18.1 millionunits in 2010. PRODUCTUNITS SEIZED Beverages 106,670 CD/DVDs 5,799,680 Cigarettes3,422,606 Electronics 393,428 IT Equipment 98,613 Medicines18,150,578 Fuels98,85412 13. CNCPSuch actions are reinforced by a website and a toll free number created by CNCP tocollect and analyze complaints.Public Ministry (MP)The Public Ministry (MP) also acts on several fronts to fight IPR violations and othertransgressions connected to organized crime. In this context, the National Group forFighting Criminal Organizations (GNCOC) was created as a working group to gather theMP intelligence structures of all states as part of an overarching plan to disrupt criminalorganizations, and to fight IPR violations. In addition to the state and federal MPs,operations ran by GNCOC often include members of the DPF, DPRF, RFB, Brazilian state13 14. revenue authorities, the Council for Financial Activities Control (COAF), the Secretariatof Economic Law, the Brazilian Intelligence Agency (ABIN), and other governmentalbodies.Judicial BodiesEnforcement improvements are also being pursued with regard to judicial activities. TheNational Council of Justice (CNJ), comprised of fifteen representatives from the publicand private sectors, is responsible for improving the quality and efficiency of publicjudicial services. Among its priorities is the assurance of expeditious and deterrentsentences. As a result of its actions, the conclusion of trials, including those involvingIPR, has been reduced in approximately 60% from January 2009 to December 2010. Inaddition, discussions to implement structural reforms in the Brazilian legal codes, suchas the Criminal Procedure Code (CPP) and the Civil Procedure Code (CPC), areunderway with a view to enhancing the Brazilian judicial system.Border Enforcement by the Brazilian CustomsDue to the relevance of border enforcement, especially in combating IPR violations andother forms of unfair trade, Brazil is putting great effort in enhancing its bordercontrols. One step in this direction is RFBs decision to implement a Customs Security,Control, and Simplification Program (PASS) to speed, facilitate, and increase security ininternational trade.An important element of PASS is compliance with the World Customs Organization(WCO) SAFE Framework of Standards to Secure and Facilitate Global Trade ("SAFEFramework"). The SAFE Framework is structured on (i) customs-customs and (ii)customs-business partnerships. Its objectives include: (i) to establish standards thatenhance the security and facilitation of global supply chains; (ii) to enhance the roleand capabilities of customs to meet the challenges and opportunities of the 21stcentury; and (iii) to strengthen cooperation between customs administrations toimprove their capability to detect high risk consignments.Besides improvements in the legal framework, Brazil is also devoted to modernize itscustoms structure. In that context, the Federal Government is planning to improvecustoms premises as well as to buy 101 scanners, vehicles, and helicopters. Moreover,the RFB has also established stricter technical and operational requirements to allow thefunctioning of areas where transactions, storage and customs clearance take place. Thenew standards contribute to a more efficient border control in accordance with WCOstandards.Law Enforcement by Brazilian Local GovernmentsThe Brazilian local governments are playing an increasingly important role in theprotection and promotion of IPR. For example, CNCP has been supporting States to 14 15. create new and improve existing specialized police stations that address IPR violations,such as the Police Station for the Fight Against Immaterial Property Crimes (DRCPIM) inthe State of Rio de Janeiro, which in 2010 seized approximately 3 million units ofcounterfeit products.CNCP has also met with Delegates of the Civil Police and of the State Secretaries ofPublic Security to identify bottlenecks in the Brazilian criminal IPR legislation with a viewto drafting a comprehensive bill to be sent to the National Congress proposing changesto current statutes.Moreover, as mentioned above, CNCP is strengthening local governments actions byhelping them to create mechanisms to prevent and control piracy as part of the CityFree of Piracy project. In December 2009, cooperation agreements were signed withthe mayors of So Paulo and Curitiba. In August 2010, a similar agreement was signedwith the Government of Braslia, Brazils federal district. CNCP also held the FirstBraslia Training Program against Piracy for 293 local government officials. Followingthe training program, the federal district registered the largest seizure (5 million) ofcounterfeit CDs and DVDs in just one day, in addition to arrests of around 30 membersof the Chinese mafia.The cities of Rio de Janeiro, Ribeiro Preto, Belo Horizonte, and Recife are alsoexpected to sign cooperation agreements with CNCP during this year.International Cooperation by the Brazilian Federal GovernmentThe Brazilian Federal Government has been pursuing multiple actions on theinternational cooperation front to protect and promote IPR, emphasizing approaches inthree areas: (i) educational; (ii) economic; and (iii) repressive. In 2011 and 2012, Brazilintends to strengthen its cooperation with strategic partners, as well as to foster closerties with other developing countries.In this sense, Brazil has actively participated in governmental bilateral working groupsto address IPR protection and promotion, having held meetings with the followingstrategic partners: i. United States: Brazil and the United States have continuously exchangedinformation on IPR under the dialogue mechanism between the Ministry ofExternal Relations (MRE) and the USTR. In the 2010 meeting, the City Free ofPiracy project achievements were the main issue discussed as far as IPRenforcement is concerned; ii. China: The first informal meeting of the Brazil-China Working Group on Intellectual Property was held in October 2009, focusing on technical cooperation to combat piracy and counterfeit, and on the implementation of educational 15 16. measures. In April 2010, the Working Group was officially established, andannual meetings were agreed to under an MOU signed by both countries.The goals of the MOU are: (a) to strengthen the bilateral cooperation on IPRissues; (b) to expand coordination in multilateral forums; and (c) to exchangeinformation on IPR national laws and regulations.In the two following meetings held by the Working Group the parties exchangedinformation on specific cases regarding IPR compliance, and emphasized that,besides further repressive action, the bilateral fight against piracy andcounterfeiting should also encompass economic and educational measures; iii. The European Union (EU): Brazil has been holding annual meetings with theEuropean Union since 2008 to exchange experiences on IPR issues. The lastmeeting took place in December 2010, when Brazil reiterated its concern withthe infringement of artists copyrights in EU countries; and iv. Japan: Brazil has also been meeting with Japan since 2008. Last year, both countries engaged in cooperation projects to enhance IPR enforcement.As for Paraguay, in December 2009, the Brazilian Congress enacted a Legislative Decree983/09 approving the creation of the Brazil-Paraguay Bilateral Intelligence Group onPiracy, Counterfeiting, and Smuggling of Pirated and Counterfeit Products. The MOU,which is currently under appreciation by the Paraguayan Congress, seeks to enhancecooperation and coordination between authorities from both countries involved infighting IPR crimes (i.e. DPF, DPRF, RFB, MRE, MP, and MJ). Once the agreement isratified by the Paraguayan Congress, Brazil and Paraguay expect to conduct moreefficient operations to prevent, investigate, and halt such violations, as well as toidentify, track, block, and recover assets connected to them.Furthermore, in order to reduce the illegal trade of goods at the Brazil-Paraguay border,the Brazilian government created the Unified Tax Regime (RTU), which simplifies thepayment of federal taxes for micro and small companies engaged in international tradewith Paraguay (Law 11989/09). In December 2010, RFB regulated the procedure ofqualification and accreditation of companies under the RTU. As a consequence, theBrazilian Federal Government expects to encourage informal traders the so-called"sacoleiros" to formalize their businesses, and reduce unfair and illegal tradepractices, including IPR violations.Finally, international cooperation by the Brazilian Federal Government also includes thesignature of cooperation agreements on innovation with France, Japan, South Korea,and Sweden. 16 17. Activities Supported by the Brazilian Private SectorThe private sector plays a prominent role in the protection and promotion of IPR inBrazil.In this context, since 2006 FIESP has been nurturing a fruitful partnership with RFB,INPI, CNCP, and important representatives from the private sector, such as the BrazilianNational Forum Against Piracy (FNCP), the Brand Protection Group (BPG), the BrazilLegal Institute (IBL), the Brazil Steel Institute (IABr), among others. The goal is toprovide government officials with valuable information from the private sector that willassist them in the fight against IPR infringement and other illegal and unfair tradepractices. Moreover, the initiative allows the private sector to better understand thechallenges faced by the government, and, consequently, enhance its actions.In 2006 and 2007, these initiatives were held exclusively for the purpose of the trainingof customs agents. However, due to successful results, since 2008 they were extendedto other government officials such as members of the Judiciary, the MP, DPRF, andDPF. The 2010 program was developed by FIESP in partnership with RFB, CNCP, andINPI, and included visits to 6 ports, 2 airports, and a workshop held in conjunction withthe Public Ministry of the State of Rio Grande do Sul (MP/RS).The successful results of the program can be translated into the following numbers:GOVERNMENTPORTS, AIRPORTS, AND YEAROFFICIALS TRAINEDBORDER REGIONS VISITED 2006364 12 2007712 17 20082516 2009 201 20103609TOTAL1,70745The 2011 training seminars schedule includes visits to 13 ports, airports, and borderregions. Moreover, as part of the Brazil Intellectual Coalition, created in 2009 inpartnership with the Brazilian Association of Intellectual Property (ABPI), the AmericanChamber of Commerce in Brazil (AMCHAM), the U.S. Chamber of Commerce (USCC),the Brazilian Research-based Pharmaceutical Manufacturers Association (Interfarma),Prospectiva, and INOVA, FIESP is envisaging to promote seminars for members of theJudiciary to raise awareness on the relevance of IPR promotion and protection.Another initiative of the Brazilian private sector was the organization of the third editionof the Triborder Seminar by the FNCP, in November 2010. In this event, entities fromthe public and private sectors from Brazil, Argentina, Paraguay, and Uruguay discussedcooperation opportunities to fight piracy, counterfeiting, and irregular imports. As a17 18. result of this initiative, in 2010 RFB registered in Foz do Iguau, a major triborder city, arecord seizure of counterfeit goods of nearly US$ 118 million. The superintendence ofthe 9th Fiscal Region of RFB, in charge of the Brazilian states of Paran and SantaCatarina, was responsible for the seizure of R$ 343,783,336.25 in counterfeit goods.FNCP also established its Click-Complaint, a website tool for anonymous complaintsinvolving IPR violations that works as a direct channel for information and supportregarding piracy. The program has recorded 310 complaints within one year.In partnership with INPI, staff members of the National Manufacturing Sector TrainingService (SENAI) and the Euvaldo Lodi Institute (IEL), a private sector-funded think tanklinked to CNI, were trained to help entrepreneurs deal with technological informationand patent-related issues. The program also offered specific courses to journalists,teachers, and SENAIs students. Also in the field of educational activities, SENAI hostsan annual technical-cultural event called INOVA-SENAI, where teachers and studentsshowcase products and processes they have created. In 2010, from the 86 projectsshowcased in the So Paulo Round, 15 were referred for patenting at INPI.Because of the indisputable need to spread information about the harmfulconsequences of piracy and other IPR violations, AMCHAM, with the institutionalsupport of CNCP, has implemented a project to educate students from age 7 to 14(Projeto Escola Legal),consolidating its belief that educational measures are essential tolegal compliance. The project focuses primarily on the importance of the IPR concept,highlighting the problems caused by piracy. In 2010, the project was implemented in 5cities and covered 81 schools, reaching 13,200 students and 1,006 educators. Since2007, the initiative has already reached around 35,000 students.In its fight against book piracy, the Brazilian Association of Reprographic Rights (ABDR),alongside with several important publishers, launched the Teacher Folder (Pasta doProfessor) a system that allows the legal reproduction of excerpts of books whileprotecting copyrights. The initiative is aimed mainly at eradicating irregular bookphotocopying in universities.In the Internet field, ABDR and the National Syndicate of Book Publishers (SNEL) haveestablished a Digital Piracy Department that monitors the illegal reproduction of books.Until August 2010, the Department removed 42,673 Internet links that allowed illegaldownloads of books.Brazilian Private Sector and Innovation PolicyConsidering the important role played by the private sector in consolidating a culture ofrespect for IPR in Brazil, CNI and its affiliated institutions, in partnership with INPI,launched in 2010 the Intellectual Property Program for Innovation in Industry. Thisprogram is the largest dissemination and capacity-building initiative for strategic use ofIPR in Latin America. 18 19. The program establishes a positive agenda to influence and raise the profile of topicsrelated to IPR as well as fighting piracy in Brazil. Its activities are based on two mainissue-areas: economy and education. i. Economy: the goal is to turn business knowledge and innovation into assets oflegally protected economic value. This way, intangible intellectual property assetscan be marketed with due legal security, expanding the protection available toinvestments and making it possible for businesses to have a return on theirinvested capital. ii. Education: the goal is to make different segments of Brazilian society aware of the importance of IPR. The protection of intellectual property rights is directly related to the generation of wealth by organizations that invest in creativity and innovation. Therefore, actions are aimed at making Brazilians more aware of aspects related to the production, protection, respect, and management IPR.In its first year of implementation, the initiative achieved major results at the nationallevel: i. Publication of three IPR guides using appropriate approaches and languages forspecific audiences: business leaders, journalists, teachers, and elementary andhigh-school students in Brazil; ii. Enrollment of over 15,000 young people and adults for online free-of-charge courses on IPR iii. Organization of three national seminars: Innovation and Intellectual Property inRio de Janeiro; The importance of Intellectual Property to the Brazilian Industryin So Paulo; and Creativity, Innovation and Intellectual Property a Seminarfor Journalists also in So Paulo; and iv. IPR training of almost 500 employees of manufacturing business associations.2. FAIR AND EQUITABLE MARKET ACCESSSection 182 of the Trade Act of 1974 determines that the USTR identifies, on an annualbasis, foreign countries that deny fair and equitable market access to United Statespersons that rely upon intellectual property protection (19 USC 2242(a)(1)(B)).According to this Sections special rules for identifications, the USTR must identify suchsituation only if it finds that there is factual basis for the denial of fair and equitablemarket access as a result of either (1) a violation of international law or agreement, or(2) the existence of barriers (19 USC 2242(b)(3)). The violation of international law oragreement deems to exist only if the United States and the foreign country are parties19 20. to the same agreement and the latter violates it (19 USC 2242(d)(3)(A)). A barrierdeems to exist if the use of laws, procedures, practices, or regulations constitutediscriminatory non-tariff trade barriers (19 USC 2242(d)(3)(B)).Finally, Section 182 requires that the USTR take into account the history of intellectualproperty laws and practices in the foreign country (19 USC 2242(b)(4)(A)), as well asefforts of the United States, and the response of the foreign country, to achieveadequate and effective protection and enforcement of intellectual property rights (19USC 2242(b)(4)(B)).Brazil does not incur in either of the situations abovementioned. On the contrary,Brazils trade policy has been favoring gradual and non-discriminatory liberalization ofthe countrys domestic market and has been remarkably consistent since the adoptionof the Constitution of 1988, and across six different Administrations: Sarney (1985-1989), Collor de Mello (1990-1992), Itamar Franco (1992-1994), Cardoso (1995-2002),Lula (2003-2010), and Rousseff (2011-2014).From 1988 to 1993, Brazil implemented an aggressive unilateral liberalization strategy.In 1985, the nominal average tariff was above 50%. After the reform, it wasprogressively reduced to 15%, where it has stayed for almost two decades with atemporary small increase during the mid-1990s due to international financial crises thataffected the Brazilian economy. The current nominal average tariff in Brazil is 13.6%(with a trade weighted average tariff of 8.6%), considerably lower than the countrysmaximum bound tariff level for agricultural (55%) and non-agricultural (35%) goods inthe WTO. In addition to the reduction of tariffs, the Collor de Mello Administration, inparticular, eliminated all discriminatory non-tariff barriers that existed.The tariff reform was further locked in through the creation of the MERCOSURframework in 1991, which established a free trade area with Argentina, Paraguay, andUruguay, and the adoption of the Common External Tariff (TEC) in 1995. Braziliancommitments under the Uruguay Round of Multilateral Trade Negotiations, concluded in1994, further strengthened the reform, providing the necessary stability for domesticand foreign companies engaged in trade and investment activities with Brazil.Moreover, Brazils monetary stabilization in the mid-1990s through the implementationof the Real Plan, coupled with a post-1999 three-pronged macroeconomic policy basedon floating exchange rate, inflation targeting, and primary surpluses, created the basisfor a strong currency and additional economic liberalization. In other words, since 2003,Brazils currency the Real has been in a consistent path towards overvaluation, thuscreating real market access for U.S. companies in addition to the reduction and/orelimination of tariff and non-tariff barriers. Reals strong position drastically contrastswith that of other currencies, including the U.S. dollar and the Chinese renminbi.20 21. WTO Doha Development RoundThe factual basis demonstrates that the Brazilian average tariff, as applied, isconsiderably lower when compared to other developing countries. However, in thecontext of the Special 301 process some interested parties in the United Statescomplained of high tariffs applied to certain products. Although the Brazilian privatesector considers it a legitimate claim from an economic perspective, it is outside thescope of Section 182 of the Trade Act of 1974. In the case of tariffs, only a violation ofinternational agreements to which both the United States and Brazil are parties fallsunder this Section.Brazil, as the United States, is an original contracting party to the General Agreementon Tariffs and Trade of 1947 (GATT 1947) and a party to the WTO Agreement.Therefore the country is bound by all WTO covered agreements, including GATT 1994,that incorporated GATT 1947 and subsequent decisions. As Brazil does not apply anytariff inconsistent with its commitments, as expressed in the countrys Schedule ofConcessions, any claim of violation is unfounded.However, Article XXVIII bis, Paragraph 1, of GATT 1947 also commends that membersof the WTO periodically engage in tariff negotiations with a view to reduce them on areciprocal and mutually advantageous basis. According to the letter and spirit of thisprovision, Brazil joined the United States in launching the Doha Development Round, inNovember 2001. According to the Doha Declaration mandate, reduction of agriculturaland non-agricultural tariffs and non-tariff barriers are one of the main goals of thecurrent negotiations. Therefore, Brazil and its private sector encourage all interestedparties to faithfully engage in such negotiations so that a mutual acceptable andbalanced outcome may be achieved, thus increasing market access on a reciprocalbasis.Since 2001, Brazil has demonstrated increasing flexibility towards an ambitious andbalanced Doha Round agreement with unequivocal support from its private sector. InJuly 2008, the country was the first to accept a proposed core issues agreementpresented by the WTO Director General, Pascal Lamy, during the Group of 7 informalnegotiations. 1 This fact was recognized, among others, by the National Association ofManufacturers (NAM) and the U.S. Chamber of Commerce, the leading businessassociations in the United States.As part of its commitment to an ambitious and balanced outcome, Brazil has also beencalling for a strong political message of support from G-20 Presidents since the groupsfirst summit in Washington, DC, in 2008.1The Group of 7 members was composed of Australia, Brazil, China, the European Commission, India, Japan, andthe United States. 21 22. Unilateral Tariff Suspension MechanismIn addition to the ongoing trade negotiations, Brazil consistently operates a unilateraltariff suspension mechanism that can be used by any domestic or foreign company.Differently from the U.S. model, by which tariff suspension proposals are gathered in asingle Miscellaneous Tariff Bill (MTB) that needs to be enacted by Congress, thus beingaffected by electoral and political cycles, the Brazilian mechanism is solely operated byan Executive Branch agency.The Brazilian Chamber of Foreign Trade (CAMEX), the inter-agency structure thatcoordinates Brazils trade policy, is responsible for accepting or rejecting tariffsuspension requests that were first reviewed by the Foreign Trade Secretariat (SECEX)of the Ministry of Development, Industry, and Foreign Trade (MDIC). If a request isaccepted, a new ex tariff classification is created for that specific good and its tariff isreduced from the applied level to 2%.The so-called Ex-Tariff mechanism applies to IP-intensive goods, such as capitalgoods, IT and telecom equipment. In the last few years, a number of requests wereapproved by CAMEX. Most of them have a direct and positive impact on U.S. exports, asthe country is one of Brazils major suppliers in these strategic sectors.In 2008, CAMEX Resolutions 44, 45, and 52 reduced tariffs for 4 information technologyand telecommunications goods (ITTG), 484 capital goods (CG), 22 integrated systems(IS), and 216 related parts. The average tariff reduction was 12%, with original appliedtariffs as high as 20%. According to estimates by FIESP, of the total items withsuspended tariff, the U.S. is Brazils first supplier in 162 cases (second only to Germany)and its second supplier in another 235 cases (more than any other country). Usingimport demand elasticity data provided by the World Banks World Integrated TradeSolution (WITS), FIESP further estimated imports increase for the five categories ofproducts within the range of 12% to 17%.From 2003 to 2010, the Brazilian Federal Government authorized a total of 13,125 extariff requests amounting to almost US$ 21 billion in imports and over US$ 137 billion inassociated investment. On average benefited imports represented roughly 15% ofassociated investment, although in specific years they reached as high as 25% (2008).Domestic TaxesIn the context of the Special 301 process some interested parties also highlighted thatthe domestic tax system of Brazil hinders market access. Again, although the Brazilianprivate sector recognizes it as a legitimate concern from an economic perspective, itfalls outside the scope of Section 182 of the Trade Act of 1974. In managing its taxsystem, Brazil does not violate any international agreement to which the country andthe United States are parties to, nor does it create discriminatory non-tariff barriers. Infact, Article 152 of the Constitution of 1988, in regulating the power to tax, dictates that 22 23. no Brazilian state, the Federal District or any local government can establish anydifferentiation in taxing any good or service based on their origin or destiny. In otherwords, the Constitution provides for a national treatment clause that is valid both withregard to goods for export and import, and to goods from different regions within thecountry.Nonetheless, the Brazilian private sector recognizes that the tax burden is an importantissue both to domestic and foreign companies. The Lula Administration has twiceproposed tax reforms. The first one was in 2003, and was aimed at eliminating the so-called tax war among different Brazilian states that takes place through themanipulation of state-level tax systems. It was approved in a considerably lighterversion and, among other outcomes, resulted in the elimination of the cumulativenature of the Social Security Financing Contribution (COFINS). The second one wasintroduced in 2008 and aimed solely at simplifying Brazils tax structure, being revenue-neutral for the federal as well as for state and local governments. Both faced strongdisagreement in Congress, but the Brazilian private sector continues to play a majorrole in shaping a tax reform that will improve the countrys competitiveness and itsbusiness environment for domestic and foreign companies.Brazil-U.S. Bilateral EngagementFinally, it is important to highlight that Brazil has, for many years, engaged bilaterallywith the United States in good faith to address trade and investment concerns raised byAmerican and Brazilian companies. This commitment can be seen in the number ofdialogues and institutional mechanisms created in the last decade, solely focused ontrade and investment policy, trade and investment promotion, and trade andinvestment facilitation issues. They are as follows: DATE OFBILATERAL U.S. GOVERNMENT BRAZILIAN GOVERNMENTINCEPTION MECHANISMAGENCYAGENCY ConsultativeMinistry of Agriculture,Department of 2000 Commission on Livestock, and FoodAgriculture (USDA)AgricultureSupply (MAPA)Consultative United States Trade Ministry of External 2001Mechanism on TradeRepresentative (USTR) Relations (MRE) and InvestmentMinistry of Development, Department of 2005Commercial Dialogue Industry, and ForeignCommerce (DOC)Trade (MDIC) 23 24. Economic Department of StateMinistry of External 2007 Partnership Dialogue(DOS) Relations (MRE) Chief of Staff of theWhite House and the President and theU.S.-Brazil CEO 2007Department of TreasuryMinistry of Development,Forum(TREAS) Industry, and Foreign Trade (MDIC)In 2001, the Consultative Mechanism on Trade and Investment was primarilyestablished to handle Brazil-U.S. IPR disputes in the WTO at that time. In addition,Brazil and the United States are reported to be investigating the possibility ofnegotiating a bilateral Trade and Investment Framework Agreement (TIFA) that wouldincrease the channels to address trade and investment concerns, including an increasedparticipation of the private sectors of both countries.3. OTHER SPECIAL 301 PROCESS-RELATED ISSUESThe Brazilian private sector believes that three other import issues not directly relatedto the proceedings of Section 182 of the Trade Act of 1974 must be addressed due totheir relevance and to the U.S. government and private sector interest in them.International NegotiationsIn the context of the Special 301 process, some interested parties complained of Brazilspositioning when it comes to negotiations in international fora such as FAO, the WorldHealth Organization (WHO), the WIPO, and the WTO. According to them, the countrywould be engaged in undermining international law related to IPR protection andpromotion. This concern has also been shared by some agencies of the U.S.government, and discussed extensively with the Brazilian private sector in numerousoccasions.As in the United States, the trade policy-making process in Brazil is contentious.Different agencies within the Brazilian government and different interest groups in theBrazilian society, including businesses, consumers, social movements, indigenouspeople, and nongovernmental organizations, have natural discrepancies in theirapproach to the wide range of IPR-related issues. Nonetheless, the Brazilian privatesector believes that the official Brazilian positioning in rulemaking exercises at theinternational level must not be confused with Brazils commitment to adequately andeffectively protect IPR and to secure fair and equitable market access for persons thatrely upon IPR protection.24 25. It is important to point out that since 2009 Brazil seems to have adopted a moremoderate approach in international negotiations, demonstrating openness to engage ina concrete discussion on the much needed reform of the WIPO Patent CooperationTreaty (PCT). A positive move in Brazils position was also noted in the last sessions ofWIPOs Advisory Committee on IPR Enforcement, as well as in the context of the G8 +G5 dialogue, the so-called Heiligendamm Process.The Brazilian private sector appreciates the more moderate stance taken by theBrazilian government in international negotiations, but notes that they do not fall underthe scope of Section 182 of the Trade Act of 1974. Moreover, international negotiationsfora are what they intend to be: spaces where countries can freely exchange views anddiscuss changes in law and approaches to issues of concern for the parties involved.These exercises shall not, and cannot in a fair basis, be taken as a measurement ofBrazils commitment. They must not overshadow concrete steps taken by the Braziliangovernment and its private sector in the last decades.IPR and Climate ChangeInternational negotiations on climate change have also become an important forum forIPR-related issues. The Bali Action Plan of 2007, in particular, provides for negotiationsrelated to transfer of technology, and some developing countries have introducedproposals that try to address the issue by adapting the current intellectual propertyprotection regime to new challenges faced by both developed and developing countriesin taking action to mitigate climate change and adapt to it.As stated before, the Brazilian private sector believes that this is a legitimate exercise.However, in light of concerns raised by the United States private sector, as well as frommembers of the U.S. Congress, it considers it necessary to better explain its ownposition on the issue.Both CNI and FIESP, the leading manufacturing sector trade associations in Brazil,presented to the Brazilian government their formal position on the issue prior to the15th Conference of the Parties to the United Nations Framework Convention on ClimateChange (UNFCCC) / 5th Meeting of the Parties to the Kyoto Protocol (KP), inCopenhagen, in December 2009.In its document, CNI stated: Protection of intellectual property rights is essential tostimulate investment in research, development, and innovation. It is important thatinternational commitments, in incorporating mechanisms to foster the transfer oftechnology, protect intellectual property rights. The protection of these rights is crucialto the reduction of technology cooperation risks devoted to low-carbon innovation. Atthe same time, incentives for technology transfer to medium, small and microcompanies shall be created, and shall take into account respective implementationcapacity of these companies.25 26. In its document, FIESP stated: [It is a FIESP goal to] create incentives to the transferof intellectual property rights as a tool to foster innovation in low-carbon technologies,thus securing the developing countries effective access to mechanisms aimed atmaximizing global efforts to mitigate greenhouse gases emissions. The low-carbontechnology transfer models in discussion shall achieve this goal in conformity withinternational trade law.Prior to the 16th Conference of the Parties to the UNFCCC / 6th Meeting of the Parties tothe KP, in Cancun, in December 2010, both CNI and FIESP reaffirmed their commitmentwith IPR protection by emphasizing the role played by innovation in the new greeneconomy.In its document, CNI stated: [The] Brazilian industry has been continually investing inR&D to produce new equipment that can reduce energy consumption in the industrialprocess. More recently, investments in improving the materials used in the productiveprocess, such as biomaterials, deserve special mention. For example, the Brazilianpetrochemical industry developed a technology for producing plastic from renewablematerials and recently set up a plant for producing 200,000 tons of GreenPolyethylene. This thermoplastic resin will contribute toward the capture of 2.5 tons ofCO2 equivalents for each ton of polyethylene. The first factory alone which began tooperate [in 2010] will contribute towards the capture of 500,000 tons of CO2equivalents/year. The bioplastic is already being marketed, replacing products whichgenerate higher emissions in different sectors, such as automobiles, toys, packaging,etc.In its document, FIESP stated: The protection of intellectual property rights has to befostered as a tool to promote innovation in the low-carbon technology sector. At thesame time, and particularly to developing countries, effective access to technologiesthat maximize global GHG mitigation efforts has to be secured.In sum, the Brazilian private sector believes that IPR connected to climate changemitigation and adaptation must be protected, but also that effective support in terms oftechnology transfer must take place. In addition, any mechanism devoted to addressthis issue shall not impose one size fits all model to developing countries, as domesticcircumstances differ greatly among them.U.S. Upland Cotton CaseThe U.S. government and its private sector have consistently demonstrated concernwith the prospect of Brazils use of cross-retaliation measures in connection to theWTO U.S. Upland Cotton case. A number of American companies and businessassociations have repeatedly discussed this issue with the Brazilian government, as wellas with the Brazilian private sector. 26 27. The possibility of suspension of concessions or other obligations under the WTOcovered agreements by Brazil, including with regard to United States persons IPR, doesnot fall under the scope of Section 182 of the Trade Act of 1974. It is a right conferredto the country by the WTO Dispute Settlement Body (DSB) in accordance with Article22.2 of the Dispute Settlement Understanding (DSU), and Article 4.10 of the Agreementon Subsidies and Countervailing Measures (ASCM).The matter at stake is not whether Brazil exercises its rights, but whether the UnitedStates will comply with succeeding rulings on the inconsistency of its domestic supportprograms with the WTO covered agreements. In almost 10 years of dispute, the UnitedStates failed to bring its measures in compliance with the WTO covered agreements, inparticular the Agreement on Agriculture (AA) and the ASCM. It only partially addressedthe issue by eliminating the so-called Step 2 program one year after the reasonableperiod of time stipulated by the DSB.Furthermore, there is no hierarchy between the WTO covered agreements, that is,compliance with TRIPS provisions is not more important than compliance with theprovisions of the AA and the ASCM. As the Appellate Body stated in the WTO Argentina Footwear case, the covered agreements are [] integral parts of the same treaty,the WTO Agreement, that [according to its Article II.2] are binding on all Members.(WT/DS121/AB/R, Paragraph 81).Nonetheless, the Brazilian private sector believes that the Brazilian government hasshown great flexibility in trying to solve the dispute, including through the disposition offinding a solution in the framework of the Doha Development Round. Moreover, it madepreparations to implement its right to suspend concessions or other obligations in a fair,equitable, and transparent manner, including through the use of public consultations byCAMEX. The Brazilian private sector has also been engaged in exploring creativesolutions to the dispute.A Provisional Executive Order (MP) empowering the Brazilian government to exercise itsright to suspend concessions or other obligations related to IPR was issued by PresidentLuiz Incio Lula da Silva in February 11, 2010 and converted to Law 12270 of June 24,2010. The Law provides the necessary legal basis for the implementation of cross-retaliation. However, it does not mandate such measures, but only implements a rightconferred to Brazil by the DSU since 1995 (i.e. to cross-retaliate under certainconditions). Furthermore, the Law is not a blank check to the Brazilian ExecutiveBranch. It only authorizes the use of cross-relation measures related to IPR if they werepreviously authorized by the WTO Dispute Settlement Body (DSB).The Law does not hinder the possibility of finding a mutually acceptable solution to thedispute through dialogue and negotiation. In fact, Brazil and the United States reachedconsensus on a temporary solution to the dispute that took the form of an exchange ofletters between MRE and USTR, a MOU on a Fund for Technical Assistance and CapacityBuilding, and a Framework for a Mutually Agreed Solution.27 28. The Brazilian private sector, as well as the Brazilian government, expects that the U.S.Congress fully implements WTO rulings by the time it approves the next Farm Bill in2012.4. THE LEGITIMACY AND LEGALITY OF THE SPECIAL 301 PROCESSThe Brazilian private sector considers it is only natural for the U.S. to raise concernsregarding IPR protection and promotion as a substantial part of its economy and itsjobs creation is heavily dependent on innovation. The establishment of the Special301 process by the USTR under congressional authority seems to reflect this reality.Nonetheless, it is also important to take into account the legitimacy and legality of theSpecial 301 process as it is based solely on foreign countries policies and practicesassessment, but not on an evaluation of U.S. IPR policy, particularly at the internationallevel.According to the WTO official record, 28 of its 420 disputes were related to IPR. Ofthese 28 disputes, the U.S. was a respondent in five while Brazil was a respondent inonly one. Moreover, according to a Congressional Research Service (CRS) report onWTO Dispute Settlement: Status of U.S. Compliance in Pending Cases dated January29, 2010, the United States has ten cases pending compliance with WTO rulings, two ofwhich related to IPR, specifically copyrights and trademarks. These facts seem toindicate a level of inconsistency between U.S. demands towards its trade partners andthe countrys own practice. This inconsistency tends to erode the legitimacy of unilateralreviews such as those conducted under the Special 301 process.Furthermore, the recent conclusion of the Anti-Counterfeiting Trade Agreement (ACTA)negotiations between the U.S., the European Commission (EC), Japan, and a few nonrepresentative developing countries adds uncertainty to the exact goals of the UnitedStates IPR policy at the international level. While ACTA negotiations were clearlyestablished as a G-8 outgrown process, the U.S. did not show any interest in involving alarger number of countries represented in the G-20 G-8s successor as the premierinternational economic cooperation forum. On the contrary, it seems that thesecountries, including Brazil, were purposefully excluded from these negotiations. Itshould be noted, however, that a careful review of the most recent ACTA draftdisclosed last December shows that most of its TRIPS-plus provisions are consistentwith the Brazilian legislation.Coupling this with the fact that ACTA negotiations were surrounded by secrecy, that itsobligations raised concerns regarding constitutionality even among members of the U.S.Congress, that it is not yet clear if the TRIPS agreement allows any kind of WTO-Plusagreements related to IPR, and that the United States clearly evaded a multilateralprocess within the WTO or the WIPO, generates doubt about U.S. intentions. In fact,plurilateral agreements negotiated by a small like-minded group of countries tend to be 28 29. used as tools to create loopholes in multilateral trade rules, as Brazil painfullyexperienced in the past with regard to the Organization for Economic Co-operation andDevelopment (OECD) Arrangement for Officially Supported Export Credits and itsconnection to the ASCM Annex I letter (k) loophole. In that sense, the conduction andconclusion of ACTAs negotiation seems to indicate a level of inconsistency betweenU.S. alleged commitment to support a multilateral rules-based trading system and thecountrys practice. This inconsistency again tends to erode the legitimacy of unilateralreviews such as those conducted under the Special 301 process.Finally, a word must be said about legality. The DSU states in its Article 23.1 that:When Members seek the redress of a violation of obligations or other nullification orimpairment of benefits under the covered agreements or an impediment to theattainment of any objective of the covered agreements, they shall have recourse to,and abide by, the rules and procedures of this Understanding. In other words, the DSUboth ensures the exclusivity of the WTO vis--vis other international fora and, moreimportantly, protects the multilateral system and WTO members from unilateralconduct.In addition, DSU Article 23.2(a) goes beyond that obligation to establish that in suchcases as described in Article 23.1, a WTO member shall: [N]ot make a determinationto the effect that a violation has occurred, that benefits have been nullified or impairedor that the attainment of any objective of the covered agreements has been impeded,except through recourse to dispute settlement in accordance with the rules andprocedures of this Understanding, and shall make any such determination consistentwith the findings contained in the panel or Appellate Body report adopted by the DSB oran arbitration award rendered under this Understanding []. Again, the DSU is clear instating that no determination of a violation of international trade rules can be madeoutside the WTO dispute settlement system.When read in conjunction, DSU Articles 23.1 and 23.2(a) seem to establish that theunilateral determination by the U.S. of an IPR-related violation by a trading partnerthrough the Special 301 process is not consistent with WTO rules. This is a fact that hasto be taken into consideration. 29